May 16, 2000    
This Date's Issues: 4302 • 4303 • 4304

Johnson's Russia List
#4303
16 May 2000
davidjohnson@erols.com


[Note from David Johnson:
1. gazeta.ru: Is Nuclear Briefcase in Legitimate Hands?
2. Reuters: Russia to present new privatisation bill in summer.
3. Novaya gazeta: Interview with Aleksandr SOLZHENITSYN. Russia 
Cries for Rescue. It is a Question of Months and Weeks, Not Years.
4. Interfax: RUSSIAN SOCIETY WANTS RETURN TO "STATE MIGHT" - GORBACHEV FUND.
5. Interfax: 20% HOPE PUTIN WILL ENGINEER FUNDAMENTAL CHANGE OF RUSSIA'S SITUATION.
6. Bloomberg: IMF Warns Russia of Social Costs Tied to Reform Plans.
7. Esther Dyson: RUSSIA: LET THEM EAT E-COMMERCE?
8. Maureen Diffley: RE: 4297-DJ/Alternatives.
9. William Mandel: 4297-DJ/Alternatives.
10. Jerry Hough: Putin's regional policy.
11. Moscow Times: Sarah Karush, Putin Carves Country Into 7 Districts.
12. Novaya Gazeta: GROWTH THROUGH CUTS.
13. smi.ru: In the "Programat" War, Kasyanov Makes Stake on Maslyukov.
14. Rossiyskaya Gazeta: Georgiy Shakhnazarov, What About the Russian President's Rights?] 


******


#1
gazeta.ru
May 15, 2000
Is Nuclear Briefcase in Legitimate Hands?
By Alexander Kornilov

The entire military leadership of Russia has resigned en masse with all 64 
generals, including the Head of General Staff, submitting letters of 
resignation. The official motive is to facilitate the formation of the new 
military headquarters and the Defense Ministry’s seniors. However, off the 
record, generals are talking about other factors. 


At presently there is no reliable information as to when exactly the 
resignation of all 64 generals occurred. Ministry of Defense representatives 
and the General Staff are refusing to comment, and some of the serving 
officers in the Ministry only found about the resignation from the television 
news reports. 


So far it is known that the Minister of Defense Marshal Igor Sergeyev 
who, in full compliance with the law, resigned on President Putin’s 
inauguration day along with the Cabinet of Ministers, was followed by the 
Head of General Staff General Kvashnin, the chief commanders of the various 
branches of the armed forces, the heads of the central departments of the 
Defense Ministry, the General Staff, all commanders of military districts and 
the Navy. Moreover, all of them stated that they were acting exclusively out 
of ‘good will’, for, with the exception of the Minister of Defense, there are 
no enactments in Russian law which require senior military staff to resign 
upon the inauguration of a new president. 


Especially surprising is that Anatoly Kvashnin, Chief of General Staff 
and one of the three in command of Russia’s nuclear brief case is among those 
who have filed letters of resignation. Hitherto, new Chiefs of General Staff 
and Defense Ministers were appointed immediately upon the resignation of 
their predecessors to ensure that the nuclear brief was left without a 
legitimate guardian for a couple of hours at most. 


The present situation is quite different: Kvashnin has been appointed 
acting Chief of the General Staff, and nobody knows for how long he will keep 
this status. He is in control of the nuclear brief case, but is this 
legitimate? 


Gazeta.Ru has attempted to shed more light on the motives behind the 
generals’ mass ‘good will’ resignation. In a phone conversation one general, 
whose identity we shall not reveal for obvious reasons, said the letters of 
resignation were filed ‘in compliance with direct orders from Moscow.’ The 
General refused to specify any further details but added, “Consider it as 
army know-how.” 


Still, it remains quite vague to us what, in this case, what to 
considered as army know-how. Is it the actual collective resignation, 
performed in the best tradition of South-American regimes, or is it the 
reason behind the decision, i.e. to help Putin appoint successors. 


How the story will develop is also unclear. There is hardly any doubt 
that the move was forced upon the generals, all of them fought hard to reach 
their high posts, therefore one can hardly believe the official version 


It is most likely that this is the first step in the replacement of 
Russia’s senior military commandment in which case will find out within a few 
days, if not hours. In the meantime, 64 acting generals are in command of the 
Russian Army at war in the Northern Caucuses. 


******


#2
Russia to present new privatisation bill in summer

MOSCOW, May 15 (Reuters) - The Russian government will present parliament 
with a privatisation bill to change the country's strategy for selling off 
state businesses before the end of the summer, a government official said on 
Monday. 


Igor Shuvalov, head of the Russian Federal Property Fund, told an investment 
conference the bill covered privatisation over the next 10 to 15 years and 
envisaged a dozen new ways to sell companies, including sale for debts. 


``Before August 15 we must give the (State) Duma (lower house) a new 
privatisation bill which will totally change all current procedures,'' he 
said. 


Russia's active privatisation process was slowed by controversial 1996 sales 
of some of the country's best firms. The 1998 economic crisis left investors 
even less interested in Russia. 


Many are also unhappy about Russian legislation which makes it difficult for 
a creditor to seize debtor's property for debts. 


Shuvalov said the government also planned to sell about 1,000 stakes in 
companies, most of which were unprofitable. 


******


#3
Novaya gazeta
Aleksandr SOLZHENITSYN:
Russia Cries for Rescue. It is a Question of Months and Weeks, Not Years
(interview with Leonid Alekseev)
May 11, 2000
[translation for personal use only]


Q: What is to be done with Chechnya? The number of dead bodies is growing,
and the end is not in sight...


A: Let me tell you, we are all very preoccupied with Chechnya, talking about
it, and this is right - but we are losing the big picture. We pretend,
lightheartedly, that everything else in the country is more or less OK. This
is not true.


As a result of the Yeltsin era, all the principal elements of our state,
economic, cultural and moral life have been destroyed and depleted by
looting. We literally exist among ruins, but pretend to have a normal life.


Russian population is dying out by almost one million per year. This is as
if we had a civil war. This happens specifically with ethnic Russians. It is
mortality that outpaces the birth rate.


We are leaving the Far North to itself, having spent centuries, still under
the tsars, upon its exploration and development. We leave it in panic, like
under capitulation - please, take our Far North, whoever wants to, we are
not going to live there.


Look at the Far East, our sparkling gem. We treat it as some sort of an
appendage, a nuisance. Go to hell, Far East, find someone to take care of
you, anyone but ourselves! Our attitude to the Far East is disgraceful.


We - President Yeltsin, to be sure - dumped twenty-five millions of our
compatriots, cut off by the CIS boundaries, without any legal protection
whatsoever, without any attention to their needs. They are all dumbstruck,
they have become foreigners in alien lands. Meanwhile, he [Yeltsin] was only
trading hugs with dictators.


What is the condition of our state? An administrative chaos. We don't have
universal laws in this country. Every region, every republic have some
peculiar, preposterous agreements of their own with the federal center. How
is this possible? Arbitrary, self-styled republics decide upon their own
constitutions, their international relations, take their own loans abroad,
which we will then have to repay as a single country. Thus, everything is
done for the country to fall apart.


As you and everybody else knows, until recently our executive powers were
hanging on invisible threads pulled by financial barons that were hidden
from our eyes. What about today? Did we receive any signal from the new
powers that they will tear these fetters away? Not yet.


All this goes under the cover of democracy. The so-called parliamentary
democracy. I said many times that our State Duma is being elected along
false party lines, it is by no means an assembly of representatives of the
people. These Duma deputies, they don't express popular opinion. They are
not connected to their voters and are not accountable to them.


The privatization was enunciated loudly and rolled across the country. The
most valuable national wealth succumbed to looting. Most valuable items were
given away for 1-2 percent of their actual worth. And no one is there to
tell us whether the plunderers will have to repay the 98 percent that they
have stolen. Will they be taken to account for this theft, or is it already
unrecoverable from foreign banks?


All our state apparatus is rotten by corruption. We heard so much chatter:
one decree against corruption, another decree... There was never a single
step taken to fight corruption. Why? Because the entire state apparatus is
bound to it and is stained with it, and there is no way out.


We heard the talk about the great reforms going on in our country. These
were false reforms, because they left more than a half of the country's
population in misery. Now what do we hear from the present authorities, what
is the encouraging conclusion they are drawing? The new strategic center of
the new president says: we'll continue reforms. That is, without any
critique, without their revision, with all their vices and outrageous
mockery? How to understand this "continuation of reforms"? Shall we continue
the looting and the destruction of Russia to its final end?


Russian land is our last remaining asset. The greedy hands of the barons are
reaching for the land. With their billions and billions of stolen dollars,
they need to preserve this money. The best and safest thing is to invest it
in land. This is why all this current propaganda in favor of the free
circulation of land. For God's sake, of course, the land should belong to
the landowner - but to the farmer, not to the financial magnate! Of all our
farmers, is there anyone today able to find means for the purchase of a tiny
slice of land? No one. It's crystal clear that this pernicious law is being
drafted for the sake of financial barons! This will end up with Russia being
parceled out to large estates, and you won't make a step without trespassing
someone's private property. Then there will be no Russia anymore.


Russia cries for help. The rescue must begin in months and weeks, not in
years from now. But the new authorities - which have been at the helm not
just for the last 40 or 120 days, but were in power already for the last
three months of the past year - have not yet made any encouraging moves.
There is no other reproach I can make to them. They haven't made anything
destructive yet, only destructive promises about going on with the
"reforms". God forbid us to go on with those same reforms to the final end.


******


#4
RUSSIAN SOCIETY WANTS RETURN TO "STATE MIGHT" - GORBACHEV FUND


MOSCOW. May 15 (Interfax) - A moderately authoritarian power is
likely to be established in Russia in the near future, which will be
appreciated by the country's society.
This conclusion comes in a report on "Russia's self-determination"
presented at a Monday press conference in the framework of a research
project on "Russia in the forming global system."
The project was carried out over 1998-2000 by Gorbachev Fund's
Center for Global Programs and continues research conducted in 1995-1997
on "Russia's national interests and problems of security."
The both projects have been carried out under former Soviet
president Mikhail Gorbachev's patronage and with financial backing from
the Carnegie Corporation in New York.
"The political elite chooses in favor of the revival of state might,
and Russian society, or at least a majority of it, hopes again to achieve
welfare through that state might," the research paper concludes.
Its authors also reached the conclusion that social protection,
fairness, equality and firm adherence to collectivist values still remain
the prevailing features of Russian political conscience. "Russian society
will passively and actively oppose the introduction of private capitalist
institutions if it is not accompanied by compensatory mechanisms," the
report reads.
On Russia's role and place on the world stage, the researchers
emphasize that "having given up pretensions of returning superpower
status to Moscow, society is oriented towards establishing Russia's role
as one of the great powers. A withdrawal from this position in the near
decades is unlikely."


*******


#5
20% HOPE PUTIN WILL ENGINEER FUNDAMENTAL CHANGE OF RUSSIA'S SITUATION


MOSCOW. May 15 (Interfax) - Twenty percent of the respondents in a
poll conducted by the Carnegie Endowment for International Peace
entertain the hope that Russia's new president Vladimir Putin will
fundamentally alter the situation in the country within the next three
years, Foundation Senior Consultant Lilia Shevtsova announced at a
conference on the theme "Russia: 2000. A Look into the Future" held on
Monday.
The main question is how much Putin will do battle with corruption,
Shevtsova said.
Only 15-18% of the poll's respondents want Putin to make a liberal
breakthrough, she noted.


******


#6
IMF Warns Russia of Social Costs Tied to Reform Plans

Moscow, May 15 (Bloomberg)
-- The International Monetary Fund said Russia needs to set aside money 
for millions of workers who will be hurt by government plans to close 
unprofitable state companies and free regulated utility prices. 


Calling some of President Vladimir Putin's proposed economic reforms 
``radical,'' the IMF's Moscow representative Martin Gilman said the 
government must be prepared to cover the costs of a social safety net for 
Russians most affected by the proposed changes. 


``Many of these types of changes can have a real impact on millions of 
workers and families throughout the country,'' Gilman said at an investment 
conference in Moscow. ``The government needs to be thinking very seriously 
about the types of support that can be given both on a regional level and 
through the federal budget to those people affected by the reforms.'' 


The fund, which stopped lending to Russia in September 1999, has said Putin's 
government is in the best position of any since the collapse of the Soviet 
Union to push forward free-market reforms. The economy is expanding at its 
fastest rate since the end of communism, growing about 7 percent in the first 
quarter from the year before, while the ruble has fallen more than 70 percent 
against the dollar since mid-1998 and world prices are high for commodities 
that Russia exports such as oil and natural gas. 


An IMF team of experts starts work in Moscow today to review Putin's proposed 
economic program, which the fund has said probably will result in renewed 
lending. 


Approval Seen 


The IMF could approve the new loan program for Russia by July, said Peter 
Boone, director of research at Brunswick Warburg brokerage. The fund's key 
shareholders, the U.S. and the European Union, are interested in the IMF 
resuming relations with Russia ahead of negotiations on reducing $42 billion 
of Soviet-era debt to governments, he said. Russia said it would ask creditor 
governments for a 50 percent reduction in the debt. 


A key part of Russia's economic plan, which is still under debate, calls for 
lifting regulations on heat and electricity prices over several years and 
reorganizing RAO Unified Energy Systems, the country's power utility, OAO 
Gazprom, the natural gas company, and the state railways. 


All three monopolies charge below market prices while accepting late 
payments, taking goods and services in lieu of cash or allowing customers not 
to pay. 


In addition, the government has proposed improving Russians' standard of 
living by boosting pensions. It also plans to close troubled banks, overhaul 
the state pension system, simplify tax legislation, eliminate barter and 
improve the court system. 


`Well-Known' 


``All of these policies are fairly well-known,'' Gilman said at the 
conference, organized by Morgan Stanley Dean Witter & Co. ``Why are they 
going to work now? That is the key question. To what extent will these really 
good ideas be translated into tangible policies and will they be implemented 
soon?'' 


Gilman said the fund has received `indications' from Putin, Acting Prime 
Minister Mikhail Kasyanov and economists developing Russia's new economic 
program that they understand the country needs to move ahead with the reforms 
quickly. 


The proposed program is ``moderately liberal,'' said Yevgeny Yasin, a former 
economy minister who has worked on the economic plan. ``It is what Russia 
needs. Now there is a window of opportunity that is connected to the new 
Russian president.'' 


The IMF has said it probably will resume lending to Russia, though it first 
wants to see what policies the new government pursues. Putin plans to publish 
his economic program by the end of this month; the lower house of parliament, 
the Duma, is expected to vote on Kasyanov's nomination for prime minister 
this week. 


Priorities 


``We need to let the new government decide on its priorities,'' Gilman said. 


The fund stopped lending to Russia last year on political concerns linked to 
Russia's war in Chechnya, alleged Russian money laundering through U.S. banks 
and the parliamentary and presidential elections. The fund also said Russia 
failed to meet some loan program conditions such as forcing its power and 
natural gas monopolies to raise the share of revenue they collect in cash. 


Last year's $4.5 billion loan program, of which Russia received one $640 
million payment, would probably be scrapped for a new program, Gilman said. 


``Our understanding is that the new government would be requesting a new 
arrangement with the IMF,'' he said. 


In addition to developing a social security system to accompany economic 
reforms, the IMF wants Russia to maintain a balanced budget, introduce 
stricter spending controls by regional authorities and pursue other reforms 
that Putin already has indicated he will make priorities. 


Russia has included about $5.6 billion in foreign loans from the IMF, World 
Bank and other creditors in its budget for this year. 


******


#7
Date: Mon, 15 May 2000 
From: edyson@edventure.com (Esther Dyson) 
Subject: Re: e-commerce in Russia


RELEASE 3.0: RUSSIA: LET THEM EAT E-COMMERCE?
(Commentary)
By ESTHER DYSON
c.2000 EDventure Holdings Inc.


Some years ago, when I was writing about the software business
in Russia, I discussed a company called Trio-Plus, which sold
through mail order to the remote regions outside Moscow and St.
Petersburg.
Unlike in the jaded, overmarketed United States, the response
rate was high, sometimes over 100 percent in certain villages. Goods
and information were scarce and paper costs were expensive, so the
catalogues were treasured and passed from hand to hand, sometimes
generating several orders from a single catalogue.
The biggest problem was orders coming in months later, at old
prices. Even dollar pricing couldn't quite solve that one.
So, when I first heard the buzz rising last year around the
notion of e-commerce in Russia, it sounded like some cruel joke, a
modern version of Marie Antoinette's famous "Let them eat cake!"
Indeed, those of us who have been working in Russia for a while
and fancy ourselves long-term investors, often don't take kindly to
the newcomers. They're naive; they give money to the wrong people,
then lose it and leave embittered.
They don't understand how different Russia is. Indeed, in many
ways Russia is another world, but experiences there can tell us a
lot about how the fundamentals of the old economics keep working
under different conditions _ both in the strange world of Russia and
the supposedly new-economics world of the Internet.
And that means that e-commerce is not just sugar-filled cake; in
fact, it is nutritious _ commerce made more efficient and effective
with electronic communications. E-commerce is all about what Russia
(and the world in general) needs: openness and transparency,
informed competition, communication with customers. If you have to
call that "e-commerce" to get people to invest in it in Russia,
that's fine with me.
My own experience primarily concerns two companies I am advising
and investing in, and I have just returned from a week following up
on them.
What is actually happening under all the buzz? Foreign
investment groups have made a number of investments in local portals
and Web start-ups, but the numbers reported as investments are
generally in fact valuations: That is, someone invested a couple of
million for 10 percent of something valued in total at $30 million.
The oligarchs _ Russia's oil and media tycoons _ are also
snooping around, some to raise money, others wanting to invest now
and sell later.
But a Web site or an e-commerce operation is just like an oil
company: It won't generate profits unless it is well-managed. And
unlike an oil company, an e-commerce play probably has few assets to
sell if it is not well-managed.
So the oligarchs are going to be disappointed to discover the
truth: The best way they can make use of e-commerce is to run their
existing businesses more efficiently and transparently.
Take Rambler, one of Russia's leading portals (www.rambler.ru),
where I just joined the advisory board. One of the first things we
did was to talk with Moscow's Center for Business Skills
Development, to make sure our people are trained for the challenges
ahead. We are also looking for additional staff with experience in
marketing, e-commerce, management and strategy.
Our job is not to pick winners, but to BUILD winners. Especially
in Russia, where the overall level of commercial expertise is low,
no one is going to succeed without lots of help from outside.
But not all "western experience" is useful or relevant. For
example, with Rambler I went to see a couple of advertising agencies
about strengthening Rambler's brand _ which is strong but certainly
needs better marketing than it has had so far. Russia's advertising
agencies are getting ready for a bonanza: Ozon.ru, Russia's answer
to Amazon.com, is doing a formal launch next month, though the site
is already up and is reportedly generating about $60,000 in business
a month _ let's face it, rather small change even for Russia. Sites
such as Yandex and port.ru are doubtless also planning new campaigns
funded by THEIR foreign investors.
Television seems the obvious answer, and was indeed heavily
pitched by one of the agencies. But the other agency, more
analytical, correctly pointed out that Russia's Net has only about 2
million regular users (or less than 2 percent of the population),
and using a mass medium such as television to reach them might not
be the best use of our scarce resources. In the West, where the Net
itself is becoming a mass medium, television may make sense, but not
in Russia.
Indeed, in Russia the real problem is not that consumers are
poor _ though that is true _ but that producers are unproductive.
Unproductive workers inevitably lead to low-salaried consumers.
Whereas in the West the Net empowers consumers to make better
use of their easy money and their scarce time, in Russia its value
is more basic. Rambler and its competitors won't do well until
somehow it can help make Russian industry and its employees more
productive, and that's why it will surround its consumer services
with a set of more business-oriented projects, probably including a
job site as well as more business-to-business services.
In that respect, one of the current winners is an affiliate of
my second investment, IBS, called depo.ru, which did about $500,000
in sales in March _ probably accounting for half of Russian
e-commerce (depending on how you count).
Instructively, this is not because it's the world's greatest Web
site, but because it's a well-run business. An extension of IBS's
Dealine wholesale computer-distribution operations, it has the
products it advertises in stock, it knows how to configure and
install them, and it can actually deliver within a few hours of
receiving an order _ at least in Moscow, which is the only area it
serves currently. And now it has an easy way of letting prospective
retail customers know what's available.
Most of the orders generated from the Web site are accompanied
by a telephone call or a fax: "Is this for real?" "Do you actually
have these in stock?" "Is the price still $500?"
But over time, the repeat orders should start to come in over
the Web or by e-mail. And instead of printing catalogues that grow
out of date, depo.ru can update its Web site in real-time.
In short, depo.ru is a real business using the Net to run its
business better. It happens to know how to do that because it is IN
the computer business, but that same expertise will spread to other
sectors.
In the end, the moral is clear, for Russia and elsewhere: the
value of e-commerce is not in the ``e'' but in the ``commerce.''
----
Distributed by New York Times Special Features
(Esther Dyson edits the technology newsletter Release 1.0 and is
the author of the best-selling book ``Release 2.0.'' She is
chairman of EDventure Holdings and also chairman of ICANN, the
Internet Corporation for Assigned Names and Numbers.)


******


#8
Date: Mon, 15 May 2000 
From: "Maureen Diffley" <KK5261@dfa.state.ny.us> 
Subject: RE: 4297-DJ/Alternatives


I have no disagreement with your opposition to the "no alternative"
argument. I tend to think that the major flaw in US foreign policy is the
distrust of democracy, when in the hands of other countries. Our attempts to
control other nations' leadership has led to varied disasters and
dictatorships - and it is not simply unethical, but entirely inefficient and
unsuccessful. That being said, I also do not view Primakov as the
would-have-been savior of Russia. I would like to believe that he really was
interested in doing all the things you mentioned (and to me it did seem he
was), however, the mandate he claimed from the Russian people was not
enough. He did not have the political strength to remain in power - one can
conclude that (at least at that time) he also would not have had the power
to fight corruption on a serious scale. 


******


#9
Date: Mon, 15 May 2000 
From: William Mandel <wmmmandel@earthlink.net> 
Subject: YOur note in #4297


David: Simply to say that I agree with your note in #4297 on all
counts. I'm glad you reminded people, accurately, of the course
Primakov would have taken, and of the U.S. role in defeating him.
And I certainly can't see how Yeltsin would have anointed anyone
who was not committed to continuing his own course. I will hedge
only by saying that as Putin is, literally, not a biological
clone of Yeltsin, and enjoys stupendous constitutional powers,
deviation from his predecessor's policies at some point down the
line is not to be ruled out.


******


#10
Date: Mon, 15 May 2000
From: "Jerry F. Hough" <jhough@duke.edu> 
Subject: Putin's regional policy


Putin's regional policy remains unclear. In the past, 
presidential representatives have had no power, but were just the eyes 
and ears of the president, or perhaps just symbolic appointments for the 
radicals. Anyone who think that Yeltsin rules through the military is 
interested in Zyuganov's point that the boundaries correspond to the 
military districts. But all this is the rankest speculation, with no 
evidence to support anything.


But organizationally what Putin is hinting is not the tightening of 
central control over the regions in the way that would be understood in the 
West. The Kremlin has near total control over the regions already. 
Conceivably he is trying to create a rational-technical, more impersonal 
system of control, but the point of the district system, as Konstantin 
Titov indicates, is quite different. It is Zhirinovsky's gubernization 
program that essentially redraws boundaries to do away with national 
units like Chechnia, Tatarstan, etc., and the protection of local 
language and culture--and affirmative action for the titular nationalities
--within them. That is, the program, carried to its logical conclusion, is 
first and foremost a Russification program and the end of units that can think
of secession on national grounds. A Moscow commentator on your pages a few
weeks ago reported that the Belarus president was glum in Moscow because the
Union between Belarus and Russia might be off. One could make the opposite 
conclusion, especially in conjunction with a gubernization program. 


To repeat, anyone over the last dozen years who takes any program 
as reality is taking an enormous risk, and this may just be so much more 
wish-list of either Putin or some group of advisers. But those who 
think that Western Europe is moving toward a United States of Europe, 
while the more integrated former Soviet Union is always going to have states 
with the sovereign powers of 1939 is making a long bet. Whenever Russia 
gets its act together, the pressure for a stronger CIS or something is 
going to be very strong. Zhirinovsky's plan did not limit guberniyas to 
Russia, and in Soviet history, chauvinism toward "internal" and 
"external" "foreigners' was always correlated. We should not get so 
absorped in applauding the theater of corruption and the attack on it 
that we support something we do not want.


*******


#11
Moscow Times
May 16, 2000 
Putin Carves Country Into 7 Districts 
By Sarah Karush
Staff Writer


Moving to tighten Kremlin control over the regions, President Vladimir Putin 
issued a decree this weekend dividing the country up into seven federal 
districts, each with its own presidential representative. 


The new representatives will replace those who now work in 80 of the 89 
regions in accordance with a 1997 presidential decree. Those representatives 
have become for the most part figureheads. 


Analysts said the new representatives could end up similarly impotent unless 
they are given greater control over the budgets and over representatives of 
federal agencies in the regions. The Kremlin may also need to follow up 
Saturday's decree with more serious measures, such as a law giving Moscow the 
power to sack regional leaders. 


Last week, Putin put to use his constitutional authority over the regions by 
suspending decrees of the leaders of Ingushetia and the Amur region. He also 
told Bashkortostan to bring its constitution in line with federal law. 


Moscow was abuzz Monday with predictions of where Putin's pledge to 
strengthen the "power vertical" would take the country. 


"Putin's decree is only the beginning of reform to restore federal control," 
said Kremlin adviser Gleb Pavlovsky. 


The new representatives are to report directly to the president and are 
charged with "guaranteeing the realization of the constitutional powers of 
the head of state within the limits of the ... federal district." 


For the most part, the representatives have supervisory functions, allowing 
them to gather information to report to the president. 


The fact that there will be only seven of them instead of 80 or 89 should 
make it easier for Putin to have direct contact with them. 


But the seven districts are not likely to help streamline the bureaucracy. 
Interfax quoted Kremlin sources as saying that the representatives will have 
deputies in the regions and in big cities. 


The seven districts, which largely conform to the country's military 
districts, may take on added significance as further reforms are carried out. 
Pavlovsky said future changes could include transferring control over budget 
funds to the district level. 


Governors - even those who currently enjoy wide-ranging powers - said they 
welcomed the creation of districts for federal control. 


"This is a necessary and natural structure for state governance," Moscow 
Mayor Yury Luzhkov was quoted by Interfax as saying. 


"I don't see anything reprehensible in this, and I'm not inclined to 
dramatize the situation," Tatarstan Governor Mintimer Shaimiyev told 
Interfax. 


Tatarstan and other so-called ethnic republics enjoy a large degree of 
autonomy, enjoying special privileges that other regions do not have. 


Some commentators said the new system would bring the republics down a notch. 


"Not one republic was made the capital of a district, which tells us that 
Moscow will equalize the regions, relying on the heads of the oblasti, who 
are also interested in getting rid of the principle of 'first among equals,'" 
Izvestia wrote. 


The capitals of the new districts are Moscow, St. Petersburg, Rostov-on-Don, 
Nizhny Novgorod, Yekaterinburg, Novosibirsk and Khabarovsk. 


Vladimir Pribylovsky, head of the Panorama think tank, said the governors' 
enthusiasm for the plan was a sign of how little it means. At the same time, 
it could indicate that they are nervous that worse is yet to come. 


The governors are trying "to demonstrate loyalty to the president where it 
doesn't hurt them," he said. 


Interfax quoted unnamed Kremlin sources as saying that there are plans afoot 
to bring law enforcement organs under federal control. 


Regional police chiefs are appointed by the president, but the appointments 
must have the approval of the governor. And governors find ways to control 
other federal officials based in their fiefs, including prosecutors, tax 
officials and judges. 


"The federal bureaucrats get extra pay and benefits from the regional 
governments. This is in essence a bribe from the regional authorities," said 
Sergei Ryzhenkov, an expert on the Volga River Valley. 


Ryzhenkov said it was in large part this state of affairs that kept the 
presidential representatives in the regions from conflicting directly with 
the governors. 


One key step in restoring federal control in the regions would be a law that 
provides a mechanism for Moscow to remove regional leaders. 


Izvestia said such a law is on the horizon. The first dismissal of a governor 
for violating federal legislation is "scheduled for this summer," the 
newspaper said. 


A further blow to the governors would be to deprive them of their seats in 
the Federation Council, or upper house of parliament. But it is unclear how 
the country could move to direct election of senators without a 
constitutional amendment. 


Article 95 of the Constitution states that the Federation Council is formed 
of two representatives from each region - one from the legislative branch and 
one from the executive branch. 


"Our chamber is a constitutional organ. It can be liquidated or changed, but 
for that you must destroy the Constitution and write a new one," Federation 
Council chairman Yegor Stroyev was quoted by Interfax as saying. 


Stroyev, who is the governor of the Oryol region, went on the defensive in 
the discussion of how to keep the governors under control. 


"Despite the fact that they've started to blame the governors and presidents 
for grabbing lots of power and for feeling like barons and princes, I would 
answer those who say those things like this: When there was neither a 
strategy for economic reform, nor a strategy for state-building, it was the 
leaders of the regions ... who kept Russia from falling apart," Stroyev said. 


Catherine Belton contributed to this report. 


*******


#12
WPS Media Monitoring Agency
www.wps.ru


Novaya Gazeta, No. 18, May 2000
GROWTH THROUGH CUTS 


The economic program developed by the Center of Strategic Developments 
entails cutting state spending by 30-40% in the near future, by reducing the 
cost of government.


According to unofficial reports, all Russian ministers have already been 
informed that their staffs are to be reduced by 10%. How much does it cost 
the government to support all the ministries? If we draw up a rating of the 
most expensive ministries, the Defense Ministry will be undoubtedly at the 
top because of its military expenditures. Without passing judgement on its 
objectivity, exaggeration or understatement, here is the data. In 1999, 
Russia spent 116.3 billion rubles on national defense, which is 124.1% of the 
sum stipulated by the annual budget. Moreover, 56.8 billion rubles (110.6% of 
the annual budget target) was spent on law enforcement activities and 
providing security.


However, First Deputy Defense Minister Nikolai Mikhailov announced at a press 
conference that "the Defense Ministry has not gone broke through carrying out 
the counter-terrorist operation in Chechnya".


It was officially announced earlier that total federal budget expenditure on 
the Chechen counter-terrorist operation was 5 billion rubles in 1999. No data 
on the costs of the Chechen operation in 2000 have been revealed yet.


The anti-monopoly agency costs Russia a pretty penny. As a result of the 
notorious auction of Tumen Oil Company shares, the state received only $90 
million, instead of the expected $260 million. Ilya Yuzhanov, head of the 
State Anti-Monopoly Commission, was very selective while choosing auction 
participants: he admitted only those he liked. As a result, some companies 
which were ready to pay good money for Tumen Oil Company shares were not 
allowed to take part in the auction - and it was friendly to Yuzhanov's 
Alfa-Bank, which gained the controlling interest in the company.


Lately, the activities of the State Anti-Monopoly Commission have given rise 
to quite a number of questions, for example: how much will Russia lose after 
all the profits from the sale of Russian aluminum are transferred to offshore 
bank accounts?


Unfortunately, such issues have not been factored into the aforementioned 
economic program. So far, it only stipulates reducing state expenditures.


*******


#13
smi.ru
May 13, 2000
In the "Programat" War, Kasyanov Makes Stake on Maslyukov 


"Kommersant-Daily" comments in its Saturday edition on an intensified "war of 
programats" on Russia's future economic development. According to 
"Kommersant-Daily", Mikhail Kasyanov added his voice to the critiques of the 
programs presented by German Gref and his key contender Yuri Maslyukov. "A 
mountain has given birth to a mouse - thank God, not a cockroach!", so was 
the premier-to-be assessment of the German Gref program; and he instructed 
his subordinates to focus on improving the Yuri Maslyukov version. According 
to "Kommersant-Daily", the changes were beneficial: the latter program has 
become more strict and clear-cut - and aggressively anti-liberal. It warns 
about a new financial bubble prepared by liberal economists (namely, that a 
10 percent annual growth is impossible for a liberal-oriented economy), and 
proposes to follow "the investment-oriented way" of Russia's development and 
"to enhance the Russian economy's monetization". Why does Kasyanov make his 
stake on Maslyukov? "Kommersant-Daily" gives its conclusion: the Gref program 
and the Maslyukov program are poles apart, and despite his young age, 
Kasyanov (through Maslyukov) represents the Kremlin's old guard, whereas Gref 
represents the new Piter's guard. That's why the "programat war" is just a 
prelude to the fight for ministerial positions. 


Comment: That Kasyanov feels filial sympathy to the red Maslyukov, has long 
been discussed in the media. Therefore, "Kommersant-Daily"'s assumption about 
the prelude to the fight for ministerial portfolios is not too smart. The 
thing is that Gref may be just pushed aside eventually (Gref has done his 
deed, Gref may quit) - he has been too long elaborating the long-term 
strategy for the country prone to very rapid changes. What is interesting, 
though, is the way Russian economy will evolve in case Gref is disposed of. 
The "monetization way" has long been Central Bank chief Gerashenko's 
id?e-fixe. Last year, CB was doing rather bad, as the amount of hard currency 
accumulated by the population reduced by $1 billion, and banks had imported 
twice as less currency than in 1998. That means the people's paying capacity 
has decreased despite all talk about the crisis-inspired rapid growth. 
Gerashenko's logic is clear: there is no currency in the country; therefore, 
the ruble must support the paying capacity. That is to say, it is impedient 
that the printing machines work day and night. However, it is unclear how the 
prices will be regulated if the dollar is less in demand. There is a danger 
that all the newly printed rubles will instigate the price rocketing, as was 
the case last year, when the domestic producers capitalizing on the import 
deficit, had monopolized the market and the pricing policy. Nevertheless, 
there is possibility that the cabinet will follow the monetary way - 
otherwise it will be unable to fulfill its promise to increase the minimal 
wage up to 200 rubles by the year's end.


*******


#14
Russian President's Powers Weighed 


Rossiyskaya Gazeta
May 11, 2000
[translation for personal use only]
Article by Georgiy Shakhnazarov, corresponding member of Russian 
Academy of Sciences: "What About the Russian President's Rights?"


"'What about the president's powers?' 
"'I do not rule out the possibility that amendments are possible. 
But we need to look carefully at the extent to which what has currently 
been formulated is in line with the interests of the state and all of 
society. If excessive measures have been included under the heading of 
the president's powers, then we can consider revising them. I believe 
that this should be the subject of extensive discussion.'" ("First 
Person. Conversations With V. Putin"). 
Responding to this invitation to join in the discussion, I hope that 
my fellow lawyers will take part, as well as anyone who has their own 
view of how the top authorities in our country should be structured. 
Vladimir Vladimirovich [Putin], as a cautious man, recommends first 
that we "take a look." It is, of course, necessary to look at -- that 
is, reread -- the Constitution, scrupulously analyzing every article. 
God forbid we should rush things and introduce into our basic law useless 
or even harmful amendments. But it should be recalled that in September 
1998, after the shock brought about by the default and experiencing a 
kind of "moment of truth," the most diverse political forces came to an 
agreement that it was necessary to substantially restrict the head of 
state's prerogatives. Yeltsin himself was ready to sign a corresponding 
agreement, and had it not been for the maximalism of the Communist Party 
of the Russian Federation faction that dominated the Duma, the matter 
would have been resolved there and then. 
This rare consensus in political practice was possible thanks to 
society recognizing its defenselessness in the face of the arbitrariness 
of the Kremlin incumbent and his entourage. Contrary to the solemnly 
proclaimed principle of the separation of powers the executive completely 
crushed the legislature. 
The latter was even stripped of the sort of prerogatives it retains 
in the most presidential of all presidential republics and which make up 
the essence of parliamentarism -- control over the budget and deciding 
issues of war and peace. 
The apotheosis of the mockery of the idea of national representation 
was the submission to the Duma of the same candidate for the premiership 
on three occasions. This did no credit to the Constitutional Court, 
which deemed this procedure of twisting the deputies' arms to be legal. 
The Second State Duma came in for some fierce abuse from the mass 
media. Given that anti-Communist rhetoric prevailed, there were plenty 
of grounds for serious criticism too. The corps of deputies was not 
conspicuous for its wisdom, our still young parliament suffered from the 
whole range of ailments afflicting the institution -- sluggishness in its 
basic legislative work, a shortage of professionalism, a lack of 
clear-cut leaders, and the existence of a disproportionate number of 
"dead souls"; it was not just certain deputies but whole factions that 
were for sale. But it is probably this extreme imperfection that 
emphasizes 
particularly graphically the need for a mechanism of "checks and 
balances." After all, if our parliament had not had its legitimate 
rights taken away from it, at least two of the biggest sins of the 
Yeltsin regime -- the war in Chechnya and the systematic squandering of 
budget funds -- would not have been possible. Weak and deficient, in 
the opinion of certain TV observers, the Duma nonetheless opposed both of 
these things insofar as it could. Parliament is nonetheless an assembly 
where there are more clever, sober, and upstanding people than there are 
fools, scoundrels, and adventurists. 
What follows from this? A revision of the president's "excessive 
rights," which, it seems to me, Putin is suggesting not without some 
sorrow? I think not. They should be maintained as before with few 
amendments. First and foremost because the political system proclaimed 
by the Constitution and established over the past few years presupposes a 
strong executive balanced by the legislature. Just as parliament should 
be able to curb any tyranny from the head of state, so should the 
president be given powers that allow him to counter, if necessary, any 
tyranny from the corps of deputies. Even under Yeltsin the presidential 
veto helped to stop the implementation of ill-considered decisions 
adopted in haste and without due grounds on a number of occasions. In 
general there is no reason to limit the executive's rights in all cases, 
when they merely counterbalance rather than exceed the rights of the 
legislature. 
The circumstances of place and time, which cannot be ignored, are now 
wholly in line with this general principle. There is clearly a general 
understanding of the fact that the newly elected president faces the task 
of getting the country out of the most profound economic, social, and 
political crisis into which the previous regime has plunged it. This 
includes the end of the military operation in Chechnya, the return of 
that republic to the Russian constitutional area, the restoration of the 
hierarchy of central authority and prestige in conjunction with extensive 
rights for Federation components and self-government at local level, a 
major offensive against corruption and crime, without which Russia will 
be unable to emerge from the criminal net that entangles it, and reforms 
dictated by the sorry experience of the past 10 years and aimed at 
creating a viable and socially oriented market economy. These and many 
other equally fundamental problems require powers at least the equal of 
those from which they emerged. Another convincing indication of this is 
the fact that, unlike his predecessor -- whose confidence ratings stood 
at 2-3 percent in recent years -- almost 53 percent of voters voted for 
the new president on the first round. That is a vote of confidence in 
every sense of the word, and one which would clearly be contravened by 
any intention to embark now on a revision of the president's prerogatives. 
I see anger or at least confusion on the faces of those of my 
colleagues who know that for the past few years the main subject of my 
articles in the press has been criticism of articles in the Constitution 
and of the political practice that has led to Russia returning after a 
brief interval to its tradition of despotism. With the difference that 
the functions of despot have started being exercised by a president 
rather than by czars or general secretaries. 
I would hasten to explain that in no event are we talking about 
leaving this set-up unchanged. Only, instead of restricting the 
president's rights, we need to expand the rights of parliament. 
First and foremost, we need to make amendments to Article 80 
Paragraph Three of the Constitution, under which the president "defines 
the basic guidelines for the state's domestic and foreign policy." That 
mission should be entrusted jointly to the head of state and the Federal 
Assembly. Furthermore, we should "spell out" more clearly the 
government's 
dependence not only on the president but also on the Federal Assembly. 
To this end, we should review the clearly wrong Constitutional Court 
ruling and interpret the constitutional article on the president's 
appointing the government with the State Duma's consent (Article 83 
Paragraph a) as a prohibition on the repeat submission of a rejected 
candidate; we should legalize the selection of a candidate for the post 
of head of the government on the basis of the results of a preliminary 
straw poll not only in the State Duma but in the Federation Council as well. 
One other point. Many politicians today are wondering whether the 
Presidential Staff will take the place of the government in its 
decisions. That was the way relations sometimes were between the CPSU 
Central Committee and the Council of Ministers in the past.... 
It is not hard to see that the required amendments are not so great. 
Some of them could even be avoided, since the reason for the confusion 
lies not so much in the inaccuracy of the constitutional text as in its 
dubious interpretation or, as is the case in the event of the Staff, in 
an overt disregarding of the letter and spirit of the basic law. 
But this is not all and by no means the main point. After all, it 
is not a question of cutting an official's powers at all costs, risking 
depriving him of a free hand in necessary cases. Effective 
administration is achieved when civil servants have the maximum number of 
prerogatives required to exercise their duties and, at the same time, are 
under potential control and bear full responsibility for their actions or 
inaction. The president is another civil servant -- albeit one of the 
highest rank. The greater the number of rights we entrust to him, the 
stronger the barriers against abuses should be. 
The main drawback of the current Constitution is that it artificially 
complicates the procedure for removing the president from office. 
Indeed, such an outcome is almost impossible if all the formalities are 
strictly observed -- as was confirmed by the attempt to impeach B.N. 
Yeltsin. Even if his opponents had succeeded in collecting the 
necessary number of votes in the Duma, any further progress of the 
impeachment would almost certainly have been blocked by the 
Constitutional or Supreme Courts or perhaps by the Federation Council. 
There is no need in this instance to cite foreign experience. We 
need only look more closely at Russian experience, which graphically 
demonstrates how pernicious is the excessive dependence of the judiciary 
on the executive. There was the sorry story of the general prosecutors 
who were removed when they made the slightest attempt to extend the 
requirements of the law to the denizens of the Kremlin. If we want real 
democratic law and order, rather than a cover for embezzlers, we should 
wait not for the advent of a ruler who will sweep all the dirt out of the 
Russian house with an iron broom, instead we should urgently guarantee 
the full independence of the guardians of the law. 
It is hardly necessary to say that if the new president, as everyone 
who voted for him believes, intends to restore the normal legal order for 
which Russian society is yearning, the proposed measures will not seem 
too burdensome to him. On the contrary, they will help solve the policy 
tasks he has outlined. The best means of restoring respect for the law 
is to demonstrate that the head of state himself is prepared to 
unswervingly follow its dictates. 
In conclusion I cannot fail to touch upon one rather philosophical 
question. Following the idea I selected as epigraph to this article, 
V.V. Putin shared his view that in general "Russia was created from the 
very outset as an ultracentralized state. That is programmed into its 
genetic code and into people's traditions and mentality." And he went 
on to make a favorable assessment of the monarchy. 
I believe in our new president's democratic convictions, and I want 
to recall that the main precept for any democrat should be a recognition 
of the absolute supremacy of the will of the people. A monarchy, even 
if it is able to play a positive role in some places, is something 
archaic that has been rejected and negated by history. Republican 
institutions have become firmly established in all the major states of 
West Europe. And Spain is the exception that proves the rule. 
Attempts by former monarchs to return to power in Bulgaria, Romania, and 
Albania have failed. And in this country the propaganda of latter-day 
monarchists has met with hardly any response in society. 
...You can say the same thing about Yeltsin as Karamzin said about 
another Boris -- Boris Godunov: "He may have been a tyrant, but only on 
occasion." But the most concise and accurate definition of democracy is 
that of K. Popper: "It is the aggregate of those institutions which 
prevent tyranny." 


******



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